Earthscan Food and Agriculture
ince the financial and food price crises of 2007, market instability has
been a topic of major concern to agricultural economists and policy professionals. This volume provides an overview of the key issues surrounding
food prices volatility, focusing primarily on drivers, long-term implications of
volatility and its impacts on food chains and consumers.
The book explores which factors and drivers are volatility-increasing and which
others are price level-increasing, and whether these two distinctive effects can
be identified and measured. It considers the extent to which increasing instability affects agents in the value chain, as well as the actual impacts on the
most vulnerable households in the EU and in selected developing countries.
It also analyses which policies are more effective to avert and mitigate the effects of instability.
Developed from the work of the European-based ULYSSES project, the book
synthesises the most recent literature on the topic and presents the views of
practitioners, businesses, NGOs and farmers’ organisations. It draws policy
responses and recommendations for policy makers at both European and international levels.
Agricultural Markets Instability
S
Cristian Morales-Opazo is an Economist in the Agricultural Development Economics Division at the Food and Agriculture Organization of the United Nations
(FAO), Rome, Italy.
FOOD & AGRICULTURE / ECONOMICS / ENVIRONMENT & SUSTAINABILITY
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Earthscan Food and Agriculture
Edited by
Miranda P. M. Meuwissen is Associate Professor in the Business Economics
group at Wageningen University, the Netherlands.
Alberto Garrido, Bernhard Brümmer, Robert M’Barek,
Miranda P. M. Meuwissen and Cristian Morales-Opazo
Robert M’Barek is an Agricultural Economist and leader of the “Agricultural
trade and market analysis” group at the European Commission’s Joint Research
Centre (IPTS) in Seville, Spain.
Alberto Garrido, Bernhard Brümmer,
Robert M’Barek, Miranda P. M. Meuwissen
and Cristian Morales-Opazo
Agricultural
Markets Instability
Revisiting the recent food crises
Alberto Garrido is Professor of Agricultural and Natural Resource Economics
and a Researcher at the Research Centre for the Management of Agricultural
and Environmental Risks (CEIGRAM), Technical University of Madrid, Spain.
Bernhard Brümmer is a Professor in the Department of Agricultural Economics
and Rural Development at Georg-August University of Goettingen, Germany.
Edited by
Agricultural Markets Instability
Revisiting the recent food crises
Edited by Alberto Garrido, Bernhard Brümmer, Robert M’Barek, Miranda
P.M. Meuwissen and Cristian Morales-Opazo
Chapter 9
The view of farmers
German pig producers
Torsten Staack
Recommended citation:
Staack, T. (2016). The view of farmers: German pig producers. In Garrido et al.
(Eds.), Agricultural Markets Instability: revisiting the recent food crises
(pp.124–128). London and New York: Routledge.
LONDON AND NEW YORK
9 The view of farmers
German pig producers
Torsten Staack
1 I ntroduction: the interest group of pig farmers
in Germany (ISN)1
The ISN represents the economic and political interests of German pig farmers. The objective of our organization, which has about 11,000 members in
Germany, is to strengthen the competitiveness of German pig farmers. Hence,
market conditions and public relations play a central role in our work. Besides
that, we execute project work in order to provide effective and economically
viable solutions to crucial questions, especially those concerning the animal
welfare discussion. This also includes forward-looking issues and current societal debates. The ISN has extensive experience in the field of public relations,
as well as in teaching the context and reality of pig farming.
2 Pig farming in Germany – still a story of success?
Pig farming has written a phenomenal success story over the last ten years in
Germany. The German pork sector shifted from being a net-importing country with a self-sufficiency degree of 80 percent to a powerful exporter with
a self-sufficiency degree of 115 percent within the last decade. Pig meat is in
demand all over the world, but German products are best known for high
quality. This is because of strict production standards comprising hygienic and
quality regulations throughout the whole supply chain.
In 2014, approximately 42 million piglets were produced in Germany.
Moreover, we import about 11 million piglets, predominantly from Denmark and The Netherlands. Hence, about 53 million fattening pigs were
merchandised in 2014 from German farmers to domestic slaughterers. In
addition to the living imports of fattening pigs, 58 million pigs were slaughtered in 2014.
Considering the last 25 years, the number of pig farmers in Germany has
decreased by 90 percent. At the same time, the amount of pigs has increased
by about 8 percent. This means that in 1999, 141,000 pig farmers kept approximately 26 million pigs; today, in 2014, only 27,000 pig farmers manage a
The view of German pig producers 125
population of 28 million pigs. In relation to this, the average number of pigs
per farm has increased from 185 pigs to 1,000 pigs.
Nevertheless, in some regions of intense processing of animals, one can
identify the development during the last years of a particular farm structure.
For instance, the region known as Oldenburger Münsterland (in northern
Germany, federal state of Lower Saxony) has the largest density of livestock
in Germany. In most cases, an enlargement of a typical family farm in this
region has been marked by a gradual construction of new stables with a size
between 1,000–2,000 finishing pig places during the last 10 or 20 years.
Until today, the majority of farms increased to an average livestock of more
than 5,000 pigs. Against the background of economic assumptions at the
same time, such a development is extremely remarkable. In 2013, the fluctuation of the average pig price varied from 1.3 to 1.45 euro per kg carcass
weight.
The fact that a typical family farm took the step forward to increase the
farm structure is a clear indication of the adaptation capacity of pig farmers
to volatile prices. In addition, the concentration of the up- and downstream
sector (for instance, animal feed companies or food-processing companies)
contributes significantly to the prosperity of livestock farms in this region.
Furthermore, policymakers too have paid heed to an agricultural development
in dialogue with the business community.
3G
reat adaptability of the pig farmers concerning
price volatility
Discussing the critical topic of price volatility in the pig market by view of the
national association for pig producers, it should be emphasized that a large proportion of pig farmers can cope very well with price fluctuations. The current
pig market is characterized by a very dignified system of commercialization
opportunities. Thus, ISN’s point of view is that the success of the pig farmers
highly depends on their trading skills. It leads to the fact that both piglet producers as well as fattening farmers deal continuously with the optimal conditions to sell their animals.
The price for piglets, as well as the price for the slaughtered pigs, complies with weekly price announcements of more than 30 producer associations
within Germany. A uniform price mask provides a fixed weekly rate that applies
to all members. It is even estimated that this basis price applies to more than
80 percent of the weekly marketed quantity of meat. The differences between
the farms are caused by some allowances and deductions to the weekly basis
price according to the corridor of the price mask of each slaughterhouse (e.g.,
slaughter weight, indications of liver, pneumonia). Assuming a gross margin of
25 euro per fattening pig, a rise of 2 cents per kg improves the profitability by
almost 10 percent.
126 Torsten Staack
4 The key to success – free market without any
political subsidies
During the last few years, the pork industry has barely received any political
subsidies. Furthermore, there are no quotas or similar listing regulations that
affect price supports. An instrument to mitigate price volatility would be the
hedge of purchase and sale on the commodity exchange. An exchange board
for pigs and piglets exists in Germany. The so-called EUREX has a registered
office in Frankfurt on the Main. Farmers can ensure their marginal returns
when they house the animal. However, the acceptance is very low on both the
sellers and buyers for various reasons. Predominantly, the market position of the
big slaughter companies plays a great role. The oligopolistic structure (the largest four slaughterers hold 60 percent of the market share) does not incentivize
the slaughterhouse firm to hedge purchase prices.
In order to eliminate any impacts of volatile prices, most pig farmers pursue
a strategy of risk anticipation. In particular, animal feed, as one of the major
expense factors, is predominantly being hedged or purchased together with
larger associations to cope with the price. Similarly, fixed contracts between the
piglet producers and takers are commonly used. In this way, a fixed link to the
fattening farm can be managed.
5 Period of structural change due to social expectations
Currently, German pig farmers undergo a period of consolidation. Particularly in the region with a great livestock density, the competition for land
is disproportionally high. Livestock farmers have to pay extreme lease prices
in order to handle their manure corresponding to sustainable agriculture and
husbandry. In addition, the new building legislation clearly complicates the
creation of larger stables, because this is only possible with the consent of the
local community. Especially in regions where the population of livestock has
reached a critical status, the development of farms is almost impossible.
The pressures of society in relation to animal welfare have also increased.
Many people have become detached from agriculture and rural life and no longer
know about the modes of production. This leads to excessive and unrealistic
expectations for farmers, which they cannot satisfy anymore.The political answer
to this social development leads mostly into legal regulations. For instance, every
stable with more than 1,500 pigs or, respectively, 560 sows needs to have a filter.
The investment for a filter is projected to an average of 5 euro per fattening pig.
Moreover, the time period for the transport of the animals should be limited.
Consequently, the amount of different political restrictions hinders the structural
change of farms. Bureaucracy is a major driver forcing smaller farms to give up
production. Low production numbers just cannot compensate the cost for the
administrative effort every farmer has to make, be it in accounting or audits
for quality assurance (e.g., a new database for the consumption of antibiotics).
Regardless of the size of the farm, there are costs that have to be compensated.
The view of German pig producers 127
6 Conclusion and requests
In the ISN’s opinion, the pig market can consequently regulate itself best –
therefore ISN makes the following requests of European agricultural policy:
1 Free market without any trade barriers: In the EU, this is the key to
success for European pig farmers. Politics should distance itself from any
market interventions (e.g., quotas, export subsidies). ISN regrets that the
EU’s Commissioner of Agriculture Mr. Hogan has deviated from his original opinion of refusing the storage of pig meat. Public stock keeping is
counterproductive and will lead to greater problems in the future.
2 When transposing a European law, it must be ensured that legal bills
are transferred equally and chronologically in national law in all
Member States, in order to avoid competitive disadvantages for certain
farmers within Europe. For instance, by means of the regulation of group
housing for sows, we have experienced a dramatic distortion of competition of sow farms in Germany. Whereas almost 99 percent of the sows in
Germany were kept in the group, this figure was 80 percent in Spain as of
1 January 2014.
3 The ISN asks policymakers to exploit new export markets. Germany
became a net exporter of pig meat in 2007 and depends on international
trade. There are about 2,500 different products made from pigs, but there
surely is no market for every specialty everywhere due to the various habits in nutrition. The European Union traditionally exports trotters or tails
to Asia, but Europeans consume the finer parts themselves, a successful
complete exploitation of the whole carcass. Especially with the current
problems of marketing in goods to regions with political issues such as
Russia, it is essential that the European Union move negotiations forward
with potential markets (e.g., South Asia, Indonesia, Taiwan, Mexico).
4 Access for third country markets: For many meat products, the EU
has a great competiveness in global markets (high quality and food safety,
labor and cost efficiency, structure in modern farms, access to global feed
markets, modern slaughter capacities).
5 Protection of high EU standards: The requirements for keeping pigs
in the EU are described as significantly higher than in most other regions
in the world. In particular, the requirements of the local population have
led to these standards. Thus, policymakers have to take care to demand the
same standards for imports (especially trade agreements). This includes, for
example, the ban on the import of meat from animals treated with growth
hormones.
6The transparency of the market should be a priority. Where fewer and
growing companies influence or even determine the market, the distribution channels disappear. That has a negative effect on competition. Market
transparency is the key factor for active participation of pig farmers in
market activities.
128 Torsten Staack
7 Not only is price volatility one of the dominant issues that farmers have
to cope with, but also the absence of planning reliability concerning
political decisions. ISN requests policies that support farmers with as
little intervention as possible and as much as necessary. The ISN stands
against any political interventions such as export refund or subsidized
private storage. Due to the short-term orientation of the pork industry,
the quantity will remain in the market. Some political interventions are
important, though, to solve animal welfare issues, such as the prohibition of
castration and tail docking. The pork industry itself makes great efforts to
achieve a better level of animal welfare. Sustainability and animal welfare
should be gatekeepers to the market in the future. However, this development needs to be driven very carefully and from a scientific point of view.
The economic aspects have to be considered as well.
Note
1 Interessengemeinschaft der Schweinehalter Deutschlands e.V. https://www.schweine.net/